September 11, 2017

Elimination of excessive prevailing wage will stimulate CT economy

Chris Fryxell

Connecticut is in a difficult position — our economy is sputtering, the state is grappling with a permanent fiscal crisis, our towns and cities are preparing for painful cuts and our unemployment rate is one of the highest in the United States.

Given this background, I found it troubling to read a recent opinion piece in the Hartford Business Journal by Kimberly Glassman ("Prevailing wage: Good for workers, good for business") arguing against a modest and reasonable increase in prevailing wage thresholds in Connecticut for the first time since 1991.

For the uninitiated, prevailing wage represents the minimum wages and benefits the government requires an employer to pay construction workers on a publicly funded project.

Prevailing wage is much higher than the minimum wage and market-driven wages, and is based off of a formula created by bureaucrats. To put it another way, prevailing wage is a wasteful unfunded mandate on our towns and cities that substantially increases labor costs for construction projects and thus stifles economic activity, hinders investment in our crumbling infrastructure and increases costs for taxpayers.

Every day open-shop construction companies build, repair and replace things for the private sector and they do so without the constraints of prevailing wage. These projects are done safely, efficiently and cost-effectively because the free market, not government, is allowed to drive the cost of everything from goods to wages and benefits. These companies are also providing good jobs to middle class workers.

The standard, market-based wages of approximately 85 percent of the construction workers in Connecticut are lower than the "prevailing" wage mandate. What makes a public-funded project any different than a privately funded project in terms of the labor cost for construction? Nothing.

Plenty of studies exist that counter the studies cited by Ms. Glassman. A recent report released by the Empire Center for Public Policy found New York's prevailing wage increases the cost of public construction by up to 25 percent. A report by Anderson Economic Group (AEG) found that Illinois spent an additional $1.6 billion on school construction due to prevailing wage over 10 years. In Michigan, AEG found prevailing wage costs the state $224 million annually. But, in reality, an academic study ought not to be required to prove something that is so simple to understand. When taxpayers foot the bill, the government makes them pay more for the same end product.

Ms. Glassman cites our neighboring states' prevailing wage laws as evidence that we must maintain ours. Given our national and global economy we cannot allow such parochial thinking to cloud our judgement. We don't just compete for economic growth in the Northeast, we are losing jobs to the south and west as well. According the U.S. News and World Report, the top three states for economic growth, three of the top four for job growth and four of the top five states for net migration don't mandate prevailing wage. The same report lists Connecticut as a dismal 44th for economic growth, 45th for job growth and 45th for net migration. That is where Connecticut will stay without making critical changes in the way the state does business.

Because prevailing wage artificially increases the cost of construction projects it means towns may lose the ability to pay for projects that require prevailing wage or are unable to pay for additional necessary projects, such as school renovations and road improvements, due to budgetary constraints. Large projects turn into smaller ones, or are eliminated altogether. Money available for capital improvements is limited and, with prevailing wage, the dollars don't stretch as far. It's a simple fact: Fewer construction projects means fewer construction jobs.

Town officials have grown accustomed to this reality and they know the tumultuous and unpredictable state budget situation adds further uncertainty for their shoestring budgets. That's why it is curious that Ms. Glassman would openly dispute the facts that our town officials must deal with every day. The "I know your business better than you" mentality is largely responsible for the difficulties we now face as a state.

The Connecticut Conference of Municipalities doesn't run a construction company and their members aren't seeking personal enrichment. They are fighting to make their towns better, increase their constituents' quality of life, grow a stifled economy, and make necessary improvements with as little impact on local property taxes as possible.

Connecticut is down, but we're not out. We must recognize that we need the lifeline of free enterprise, not the anchor of government intrusion. Addressing the outdated prevailing wage laws is just one action we can take to encourage development, increase job growth and get our great state back on track to prosperity.

Chris Fryxell is the president of the Connecticut Chapter of the Associated Builders and Contractors.

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